Citation

Discussion Paper Details

Please find the details for DP8097 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Who Invests in Home Equity to Exempt Wealth from Bankruptcy?

Author(s): Stefano Corradin, Reint Gropp, Harry Huizinga and Luc Laeven

Publication Date: November 2010

Keyword(s): home ownership, homestead exemptions, personal bankruptcy and portfolio allocation

Programme Area(s): Financial Economics

Abstract: Homestead exemptions to personal bankruptcy allow households to retain their home equity up to a limit determined at the state level. Households that may experience bankruptcy thus have an incentive to bias their portfolios towards home equity. Using US household data from the Survey of Income and Program Participation for the period 1996-2006, we find that especially households with low net worth maintain a larger share of their wealth as home equity if a larger homestead exemption applies. This home equity bias is also more pronounced if the household head is in poor health, increasing the chance of bankruptcy on account of unpaid medical bills. The bias is further stronger for households with mortgage finance, shorter house tenures, and younger household heads, which taken together reflect households that face more financial uncertainty.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8097

Bibliographic Reference

Corradin, S, Gropp, R, Huizinga, H and Laeven, L. 2010. 'Who Invests in Home Equity to Exempt Wealth from Bankruptcy?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8097